In March, the Canadian Pacific Railway announced it had agreed to purchase the Kansas City Southern railroad in a deal valued at $29 billion, creating the first rail network to connect Canada, the United States and Mexico.
Before finalization, the agreement must receive blessing from the Surface Transportation Board, the federal agency charged with regulating freight rail. If approved, this would be the first merger between two Class 1 railroads in more than 20 years.
“There’s a lot of speculation about the impact on grain markets, but no one really knows,” said Eric Williams, director of grain operations for MFA Incorporated. “And the merger has a long way to go to pass through all the governmental regulations.”
CP’s cross-Canada network stretches into the U.S. as far south as Kansas City, Mo., and the KCS line extends south from there into Mexico. Officials say the combined rail company—to be named Canadian Pacific Kansas City—would allow grain companies and other shippers greater efficiency and supply chain integration as trade ramps up due to the new USMCA (United States-Mexico-Canada Agreement).
With expected revenues of about $8.7 billion, the merged rail network will be much larger and more competitive, operating approximately 20,000 miles of rail, employing close to 20,000 people and generating total revenues of approximately $8.7 billion. Still, it will remain the smallest of six Class 1 railroads by revenue.
MFA only has one grain location on the CP line, in Laredo, Mo., but several on the KCS railway, including Glasgow, Higginsville, Vandalia and Laddonia. The shuttle-loader in Marshall, operated by Central Missouri AGRIService, an MFA joint venture, is also positioned on the KCS.
Williams doesn’t expect the merger to greatly impact MFA’s grain operations, but he said there are still many unknowns that could bring opportunities and challenges. One of those uncertainties is the April 20 announcement that Canadian National Railway offered an unsolicited higher offer for the KCS, spurring a possible bidding war.
“The synergies are definitely there with a true USMCA railroad,” Williams said. “For us, it’s not going to add a lot of benefit except maybe an increased car supply, but it could mean more competition. At this point, there are more questions than answers.”
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